State officials have begun discussions about rescinding a potentially costly computer software contract that has become an election-year embarrassment for Governor Davis.

The 95 million dollar, no-bid contract between the state and Oracle Corporation was initially touted as a way for California to save at least 16 million dollars through volume purchases of database software and maintenance of those systems. The state auditor issued a report earlier this year saying the contract could end up costing the state up to 41 million dollars more than if it kept its previous software sources.